UnitedHealth Group (NYSE: UNH - option chain) stock is falling today after Chairman of the Board Richard T. Burke sold 100,000 shares of the stock on the open market last Friday. That equates to $2.9M of selling against no insider buying in the past two months. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on UNH.This morning, UNH opened at $27.06. So far today the stock has hit a low of $26.37 and a high of $27.80. As of 11:30, UNH is trading at $26.98, down $0.61 (-2.2%). The chart for UNH looks bullish and S&P gives UNH a positive 4 STARS (out of 5) buy ranking.
For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $31 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in six weeks as long as UNH is below $31 at June expiration. UnitedHealth would have to rise by more than 14% before we would start to lose money. Learn more about this type of trade here.
UNH hasn't been above $31 since September and shown resistance around $30 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in UNH.
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